Giants upset market for online education

Nieuws | de redactie
28 november 2012 | The arrival of ‘elite universities’ on the market for online education has greatly shaken up the competition. The biggest for-profit competitor University of Phoenix has seen shares plummet. Those with the capacity to scale will win.

This year has been a challenging one for Apollo Group, the parent company
of the University of Phoenix, the market leader in online education. In one
year Phoenix’s enrolment figures fell with 14% to a – still impressive –
328,400 students. Apollo’s shares went down from $58 at the start of 2012
to $19 in November.

The University of Phoenix announces 800 job cuts and wants to shut down
115 learning and student-resource centers throughout the U.S. Apollo Group
is now focusing more on servicing big U.S. employers, as a way to distinguish
itself from the new market entrants.

Beurskoers van Apollo Group

(Stock chart of Apollo Group by NASDAQ)

A report by the Parthenon Group (advising both non-profit and for-profit educational institutions) underlines the rapid shift in the market for online education. “Recently for-pro?t institutions have experienced enrollment declines while traditional non-pro?t universities capture headlines with new online programs, enrollments gains, and growth initiatives that include open courseware such as Coursera and EdX.”

“For a decade, for-pro?t universities like the University of Phoenix, DeVry University, Ashford University, and Capella University took share from traditional higher education. The for-pro?t share of post-secondary enrollments doubled from 2004 to 2010, going from 6% to 12%.”

Sleeping giants now awake

“With several non-pro?t schools surpassing 20,000 online-only enrollments – and even more signing partnerships with online enablers like Embanet, Bisk, 2Tor, and Deltak – the sleeping giants are undeniably awake. Building on the successes and lessons learned from the for-pro?t sector, non-pro?t institutions are taking advantage of strong reputations and rapidly scaling online programs.”

The changing competition is due to the fact that today’s institutions have to compete on brand, price and outcomes as students have become increasingly well-informed and price-conscious.

Targeting a new student segment?

“With some scale universities already established – and more coming online every month – the question is not whether the non-profits will ever make the jump to online, but rather whether they are targeting the same student demographic.  Are non-profit institutions simply cannibalizing existing 18-24 year old students? Or are they targeting a new student segment that was previously served by for-profits?”

So Who Will Win? According to the Pathenon Group: “A small number of rapidly expanding institutions will ultimately emerge from the pack and be able to leverage increased revenue and brand awareness to attract faculty, improve the student experience, and build new relationships with employers. The race is on to scale as quickly as possible, and the winners will almost certainly be those institutions that can differentiate themselves in the eyes of students, faculty, and accreditors.”

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